Recovering Trust as a Key to Effective Public Policy

It is a great pleasure to participate in the Salzburg Global Seminar, dedicated to: “Restoring the Public’s Trust by Delivering on Public Policy Goals.” Congratulations to the Volcker Alliance for organising this event.

Public trust is one of the most precious assets that a country can have; it is the cornerstone of effective governance, the main ingredient to promote economic growth and social progress. Like never before, our countries are running dry of this precious asset. Like never before, our citizens have doubts about their government’s capacities to make the right decisions. And like never before, we need to take the necessary measures to recover that confidence. This is why this meeting is so important.

A Crisis of Trust

The global financial and economic crisis has had a terrible impact on public trust in governments. Indeed, it highlighted serious governance and regulatory failures, limited enforcement, revolving doors, regulatory capture, plain corruption and conflict of interest. This feeling of mistrust is heightened by concerns about fairness in fiscal consolidation and in the sacrifices required for structural adjustment. This has resulted in plummeting levels of trust in governments.

According to Gallup World Poll, the average confidence in national government in OECD countries stood at 40% in 2012 (down from 45% in 2007). This means that the majority of the population in OECD countries doesn't trust governments. And we need to understand the historic importance of this failure.

These numbers are not just a statistical variation or temporary slump. I think these numbers reveal a major fracture in our social contract, to such an extent that it questions, in the mind of an increasing number of people, the legitimacy of the authority of the State over individuals. This is the size of this risk. And this is why we need a major policy debate on rebuilding trust.

Without trust in government no policy, no reform, will be ambitious or effective enough to reactivate our economies and leave the crisis behind. Rebuilding trust has become strategic for the global recovery but, even worse, for the viability of the State.

This is why we think that a quick fix won’t do. Governments need to think big. What our nations need is a national Strategy for Trust! At the OECD we believe this is possible and urgent. And we recommend that any such Strategy for Trust should be built on three strong pillars: integrity, transparency and engagement.

The First Pillar: Integrity

Integrity is key to restoring trust. There is a high number of citizens who believe that corruption in government is widespread: it’s three-quarters of the population in the US, and almost 90% in Italy, Greece, and Portugal. The distrust between citizens and the political process is also alarming. According to the 2011 Transparency International Europe Barometer, almost 50% of respondents view their political parties as corrupt or extremely corrupt.

At the OECD, we help countries to strengthen trust in the policy making process by turning knowledge into guidelines and principles in high-risk areas. These include for instance, public procurement, which accounts for 13% of GDP on average in OECD countries. It also includes lobbying: spending on this more than doubled over the past 15 years, increasing from USD 1.44 billion to USD 3.30 billion.

It is also about time to attack the problem of political finance regulation! Many OECD countries have national regulations in place to promote fair competition between political parties and/or candidates by balancing sources of funding, introducing bans and limits on certain types of donations, and introducing reporting and transparency requirements. But our data suggests that we are far from solving the problem of what I call “financing democracy” – in practice the measures are not proving effective: in the past years we have seen major political figures trashed in disgrace due to bad practices in this domain; electoral campaigns have taken over the steering wheel of democracy, confusing the means with the end.

The Second Pillar: Transparency

Transparency is crucial across so many domains, including for budget and tax transparency. Citizens want to know how their money is being spent. This is only fair. Governments must be held accountable for their budget spending in a transparent and comprehensible way. This means publishing and communicating easily digestible budget data.

Transparency of the tax system is critical to building trust in policies and policy outcomes. Our societies want to feel that they are paying a “fair share” of the tax bill. In today’s world – wrong or right – there is a perceived unfairness of tax policy outcomes, which needs to be tackled to build back trust.

For example, there is a growing realisation that multinational enterprises (MNEs) are getting out of paying what they owe by shifting profits to locations with favourable tax treatment. Base erosion and profit shifting (BEPS) constitutes a serious risk to tax fairness, tax sovereignty and tax revenues for countries around the globe. The OECD is partnering with the G20 to lead the charge on tackling BEPS through the OECD/G20 BEPS Action Plan, which puts forth 15 ambitious actions that should result in fundamental changes to international tax rules. There is also a G20/OECD sponsored move towards automatic exchanges of information on taxes, eventually involving all relevant countries and jurisdictions to fight against tax avoidance by individuals. “Nowhere to hide” is the goal.

Our regulatory and supervisory structures have failed us in many important ways. This is resulting in a degradation of the idea of the State as that strong institutional framework that guaranteed our safety, our prosperity, our right to succeed, through a system of checks and balances inspired in a crucial principle: accountability. Our governments now need to make a major effort to restore this certainty and with it the respectability, the credibility, of the State. The OECD is supporting these efforts, with different tools: like our recently updated Principles on Regulatory Quality, the OECD Working Group on Bribery; the Annual High-Level Anticorruption Conference for G20 Governments and Business; and the CleanGovBiz Initiative, to name but a few.

The Third Pillar: Engagement

Finally, the third strong pillar is Engagement. What do we mean? Well, that we need to get serious about Open Government as an interactive process that promotes inclusive and responsive policy making through real engagement with citizens. Trust is not only about tackling corruption and putting government data on websites, it is also about giving citizens a voice in the process, and ensuring that public services are well adapted to people’s needs. I’m talking about recovering faith in democracy as an effective system to improve our lives.

Like never before, our governments have access to a myriad of techniques and tools to involve people in governmental action. The OECD Observatory of Public Sector Innovation is gathering examples of good practice from across the globe to support governments in identifying innovative ways to deliver public services and reach out to communities. Australia, for example, has launched the Next Step online community to better assist parents going back to work after years out of the workforce. Small steps like these go a long way in promoting public engagement and rebuilding trust.

These are the three pillars of our proposal for a Strategy for Trust. If governments implement measures to make progress on these three objectives they will gradually start rebuilding the confidence that makes our economies work, our societies progress and our dreams grow.

Ladies and Gentlemen:

“Our distrust is very expensive”. May these words of Ralph Waldo Emerson serve as a warning. Because there is too much at stake in this crisis of trust. Our lack of trust in public policy has huge economic and social costs because it is delaying our own recovery, postponing job creation, scaring investments away. But beyond these important economic implications, there lies a bigger risk: the degradation of our confidence on the State as a moral entity; our lack of enthusiasm for the political system that we have built throughout hundreds of years of Western civilisation: It is democracy itself that is at stake.

I am sure that this Seminar can make a valuable contribution to rebuild trust in governments and public policies. The OECD stands ready to keep collaborating with the Volker Alliance in this and other future endeavours.